Analysts call lending rate peak after yesterday’s better than expected inflation numbers cheer markets

Housebuilders share prices have surged after the first concrete evidence emerged of the impact of yesterday’s lower than expected inflation figures on borrowing costs for home buyers.

Financial data provider Moneyfacts said the average cost of two- and five-year fixed rate mortgages fell overnight – the first drop in both metrics since rates started rising again in late May on renewed inflation fears.

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It said the average cost of a two-year fixed-rate deal fell back to 6.79%, from 6.81% the previous day, with the average cost of a five-year deal dropping to 6.31% from 6.33%. The falls in lending rates come in response to falling “swap rates” for debt on financial markets in recent days, which accelerated yesterday on news of lower than expected inflation numbers.

The inflation reading of 7.9%, lower than forecast, prompted speculation that the Bank of England will not have to raise its base rates as far as had been feared in a bid to bring inflation down to the 2% target rate.

The value of listed housebuilders rose sharply again today on the Stock Exchange as news of the mortgage rate falls emerged, with the value of Persimmon shares this morning trading 12% above the level seen prior to the inflation announcement yesterday. Shares in Barratt, Taylor Wimpey and Vistry have all risen by more than 9% since the figure came out.

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Analysts are seeing the drop in mortgage rates as evidence the cost of borrowing may have peaked, hinting at less turbulent year ahead in the housing market. However, despite the slight overnight fall in rates, the cost of a two-year fixed-rate deal remains close to a 15-year high, and above the level reached in the peak of the post mini-Budget crisis in the autumn of last year.

The news came as more evidence emerged today of the impact of the recently resurgent mortgage rates on developers. Vistry said this morning it had seen a “slowdown” in private sales following the increases in mortgage costs, and Barratt last week said it was going to reduce output by up to 23% next year.

Redrow this week launched a restructure to cut overheads in advance of reducing output at the company to prepare for the downturn, while Weston Homes founder Bob Weston this week said the combination of market and planning woes could drive build rates down by 40% over the next year.

Barret Kupelian, chief economist at consultant PwC, told the Guardian a fall in the consumer prices index (CPI) in June was likely to persuade the Bank of England not to raise its base rate as far as 6.5%, adding that he also expected next month’s inflation figures to be positive. He said: “This would mean that those intending to refinance their mortgages in the next few months could do so at possibly more favourable mortgage rates than those on offer at present.

“This effect, coupled with possible real wage growth, could mean the housing market could be in a considerably different place in six months’ time, with a bounceback possibly in sight.”

Lewis Shaw, founder of Shaw Financial Services, told This is Money that he believed mortgage had “peaked”. He said: “The continued painful increases are over. That doesn’t mean that we’re out of the woods because monetary policy takes a long time to show up, however it does mean we can now start to see the faint glimmer of a light at the end of the tunnel.”